#MTBPS2018: Public servants’ wages balloon, but headcount is not to blame

The public servants wage bill remains the single largest component of expenditure in the Medium Term Policy Framework, but with elections approaching in 2019 the Medium Term Budget Policy Statement (MTBPS) provided no concrete plans to address this, only stating that government is working on an approach to manage these pressures over the medium term.

According to the MTBPS, public servants compensation, accounts for 34.7 per cent of consolidated expenditure, and forms the major driver of spending pressures. The MTBPS highlights that “it is one of the fastest-growing items in the budget, increasing at an average of 11.2 per cent a year”.

It adds that “the 2018 public-service wage agreement (see box) exceeded budgeted baselines by about R30.2 billion through 2020/21. National and provincial departments are expected to absorb these costs within their R1.8 trillion compensation baselines over the same period.”

The MTBPS also states that “over the long term, government and trade unions need to agree on an approach that ensures fair remuneration and a sustainable wage bill”.
An annexure to the MTBPS deflects that issue of the amount of public servants to earnings growth, stating that “earnings growth, rather than headcount, has been the major driver of the public-service wage bill over the past decade”.

The annexure says an analysis of compensation spending since 2006/07 reveals the following trends:

• The main driver of increased spending is large increases in wages and other employee benefits, rather than increases in employment.
• The increase in average real wages is partly explained by above-inflation agreements reached between government and unions, but wage progression and promotion policies account for a considerable proportion of the rise.
• Wages have increased most rapidly in the lowest ranks of the public service, compressing wage distribution.
• Overall, the number of public servants has increased since 2006/07. Employment peaked in 2012/13, after which personnel numbers have fallen by just over 1 per cent. This decline is insufficient to contain real spending growth due to continued growth in real wages.
• There is a significant amount of turnover in the public service, with as many as 6 per cent of personnel leaving in a given year.